Strong start to 2018 for VC market with Q1 tally of US$49.3bn invested worldwide
2018 had a rousing start with US$49.3bn of venture capital investment raised across 2,661 deals in Q1, just shy of the global record for a single quarter, according to Venture Pulse Q1 2018, a quarterly report on global VC trends published by KPMG Enterpr
While venture capital deal volume continued to decline, the median deal size globally continued to grow across all deal stages in Q1 reaching US$1.3m for angel and seed stage rounds, US$7.7m for early stage rounds, and US$15m for later stage rounds.
In Australia, Q1 VC investment reached US$130.5m across 16 transactions, spurred by significant deals including Canva’s US$40m Series C funding round, which valued the Sydney-based startup at US$1bn. Other significant funding deals recorded during the quarter included data room software startup Ansarada’s US$18.92m Series A round and Adelaide-based space IoT startup Myriota’s US$15m Series A round.
“Australian startups continue to attract increasing levels of commitment, both from local and international investors,” said Amanda Price, head of KPMG High Growth Ventures in Australia, “with larger investment rounds reflecting the ambitions and capabilities of these startups to expand into global businesses. Recent fundraising by Australian venture capital funds meaning there is more money on the table than ever before for our startup founders.”
Q1 ’18 KEY GLOBAL HIGHLIGHTS
• Global VC investment rose from $46bn in Q4’17 to US$49.3bn in Q1’18, a solid increase buoyed by five US$1bn+ megadeals. • The number of global VC deals declined for the fourth straight quarter, falling from 3,286 in Q4’17 to 2,661 in Q1’18. The number of VC deals has dropped by half since reaching a peak of 5,480 deals in Q1’15. • The Americas set a new record for VC investment in Q1’18, with US$29.4bn raised across 1,782 deals, with Asia raising US$14.6bn across 317 deals, and Europe with US$5.2bn raised across 548 deals. • Corporate participation in global VC deals set a new record for the second straight quarter, rising from 18.5 percent in Q4’17 to 21 percent in Q1’18. • New and old unicorns – companies valued at over US$1bn – attracted a significant amount of funding with US$14bn across 32 deals. • Two unicorns went public late in Q1’18: cloud-based security provider Zscaler and cloudstorage provider Dropbox, with both companies seeing positive results to date. With Spotify set for a direct listing in April and UK-based online loan provider Funding Circle planning to go public later this year, the IPO market may be opening up.
COMPETITION IN THE RIDE-HAILING SPACE REACHES FEVER PITCH
The ride-hailing industry attracted massive VC investment this quarter, accounting for four of the quarter’s five largest deals, including: US$2.5bn raised by Singapore-based Grab, US$1.7bn raised by US-based Lyft, US$1.5bn raised by Indonesia-based GO-JEK, and US$1.25bn raised by US-based Uber. Electric car manufacturer Faraday Future rounded out the top five, raising US$1.5bn.
US SEES RECORD VC INVESTMENT IN Q1’18, PROPELLING THE AMERICAS TO STRONG RESULTS
The US saw a record-setting level of VC investment in Q1’18, with US$28.2bn invested across 1,693 deals. In addition to the three US$1bn+ megadeals seen in the US, a bevy of US$100m+ deals helped propel VC investment to a new high. In addition to transportation and autotech, biotech was a big winner in the US this quarter, with large raises by Moderna Therapeutics (US$500m), Harmony Biosciences (US$295m), and Viela Bio (US$282m).
Across the Americas, Canada matched its second-best quarter of VC investment, with US$800m raised across 72 deals, including a US$219m raise by alternative fuels producer Enerkem. Brazil also saw a nice quarter of VC activity, with Nubank achieving unicorn status following a US$150m raise.
VC INVESTMENT IN EUROPE REMAINS HIGH AGAINST HISTORICAL NORMS
Europe saw US$5.2bn in VC investment in Q1’18. Amid a quarterover-quarter decline, Q1 was the fourth highest on record in the region. The number of European VC
deals continued its sharp decline, falling to 548, less than half of the number of deals seen during the same quarter last year.
Strong activity outside the UK helped keep European VC investment high although Ireland bucked the trend with investment increasing strongly quarter-overquarter to US$162m. Germany saw its second highest quarter of VC investment, just shy of US$1.5bn raised and led by a US$560m raise by Auto1 Group. France, meanwhile, achieved a new high of US$767m of VC investment, further cementing its growing prominence as an innovation leader in Europe. Spain also saw a strong quarter, boosted primarily by a US$160m raise by Cabify.
MEGA-DEALS CONTINUE TO SHAPE ASIAN MARKET
Asia continued to see large deals in Q1’18, as two US$1bn+ megadeals were struck outside China with Singapore-based Grab raising US$2.5bn of Series G financing, and GO-JEK in Indonesia closing on US$1.5bn of Series E funds. While VC investment in China fell significantly quarter-overquarter, the country saw a healthy number of US$100m+ megadeals and an increase in the number of deals. India’s VC market got off to a great start in Q1’18, seeing a strong rebound in investment. Food and grocery delivery was the hottest area of investment this quarter, with unicorn company Zomato raising US$200m and BigBasket raising US$300m.
STRONG OUTLOOK EXPECTED FOR REMAINDER OF 2018
VC activity globally is expected to remain strong, with an increasing focus on artificial intelligence (AI) autotech, and healthtech. With exit and IPO activity also expected to increase over the next few quarters, there will likely also be a renewal of activity at the earliest deal stages.
“Venture capital investors continue to pour money into latestage companies, in part because of the number of aging unicorns that have remained private,” said Brian Hughes, National Co-Lead Partner, KPMG Venture Capital Practice, and a partner for KPMG in the US. “With strong IPO exits by Dropbox and Zscaler this quarter, and an increase in the number of IPO filings, we could see the tide turning over the next few quarters, bringing with it a resurgence in early stage deals activity.”